STANDARD COSTING Question 12 (December 2005) Houchen ttd uses a standard absorption costing system to control the manufacturing costs of its time product. The following standards have been set: Direct material 2 kes at E6 per kg. Direct labour 1 hour at E7 per hour Fixed overheads (per unit 12 7 9 Total production cost The fixed overhead standard cost per unit is based upon a budgeted monthly production of 4,000 units Actual results for the most recent month were: Production 4,300 units Direct material Cost E56,000 for 9,000ks Direct labour Cost 32,800 for 4,600 hours paid. Only 4,000 hours were worked. Fixed overheads 35,000 No direct material stocks are held Required: (a) Calculate the following variances: Direct material price: (0) Direct material usage: (1) Direct labour rate; (iv) Labour idle time; (V) Direct labour efficiency: () Fixed overhead expenditure Fixed overhead volume. (14 marks) (b) Explain the meaning and suggest one potential cause of each of the following variances: Direct labour rate; (10) Labour idle time: ( Direct labour officiency. 16 marks) 120 marid (vi) The Notes Are Not For Sale